Can I force the Child Tax Credit to be non-refundable? How can the taxpayer return a payment that they do not want?
If the taxpayer and their children qualify for the refundable CTC, it will be calculated per IRS guidelines. While certain religious groups are exempt from getting SSNs, if the children have valid SSNs (and meet the other requirements) they are eligible for the refundable Child Tax Credit. Generally, taxpayers who are eligible to file Form 4029 (i.e. the Amish), will accept a non-refundable tax credit that will decrease their tax liability, but not result in a refund. The IRS recently released guidance for these taxpayers that states the following:
"If you are eligible to file, or file, Form 4029 (Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits), and you want to claim only the nonrefundable portion of the child tax credit, and not the refundable portion of the child tax credit, complete Schedule 8812 (Form 1040) as follows:
- Complete Part I-A, lines 1 through 13, but do not check either box on line 13.
- In the empty space to the right of line 13, write "Form 4029" to explain why you didn't check either box on line 13.
- Complete Part I-C.
- In Part II-A, on line 18a, enter $0.
- In Part II-B, on line 23, enter $0.
- Enter the amount from Part I-C, line 15g on Form 1040 or 1040-SR, line 19.
If you received advance child tax credit payments for 2021, and want to return those payments, see 2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic N: Returning a Payment for how to return the payments."
If the taxpayer qualifies, in Drake21, check the box Claiming only nonrefundable child tax credit and filing Form 4029 or eligible to file Form 4029 on the 8812 screen. Be sure to review the field help (F1) and the IRS guidelines for details before making this selection. The amounts from Letter 6419 (if received) should still be entered to reconcile the ACTC and CTC amounts.